Maximizing Your Profitability for Long-Term Success
Whether you are a real estate investor, a general contractor, or an engineering firm, your success depends on growing your business and your network despite market fluctuations, tax regulations, and compliance standards. DiSanto, Priest & Co. already represents many of New England’s top real estate investment and construction firms, so we are fully equipped for the job.
At DiSanto, Priest & Co., we lay the foundation for your success with our full-service approach and commitment to the Real Estate & Construction industries. With our experience and extensive resources, we help you maximize profitability for long-term success and, for real estate investors, provide guidance through the entire lifecycle of your investment. Our unique hybrid tax, assurance, and advisory services were designed for Real Estate and Construction firms like yours. As your business grows, our local CPAs custom-fit specialized tax, audit, and advisory services grow with you.
Helping You Achieve Sustainable Growth
You have ambitious goals for your Real Estate or Construction firm, but as with any business, there are growing pains. Whether it’s seeking financing, a lack of available work, or adhering to federal and state compliance standards as you start new jobs, the future of your company depends on the foundation you lay today for your future goals. Life’s too short. Plan proactively so you can enjoy today instead of worrying about tomorrow.
Our Real Estate CPAs Make Your Success Our Business
We’re one of Rhode Island’s top accounting firms, and we pride ourselves on understanding the Real Estate and Construction industry and leveraging our extensive resources and affiliates to help you reach your goals. Our network of experienced professionals offers valuable knowledge on the unique compliance and economic changes that impact your industry every day. We’re also a member of local Real Estate and Construction organizations, including Building Owners & Managers Association, Rhode Island Builders, and Institute of Real Estate Management. Because you don’t need just another accounting firm – you need a relevant advisor who specializes in Real Estate accounting.
Many companies are expanding their business transactions across state borders and finding themselves operating with a mobile workforce. With many states aggressively attempting to find ways to close their budget deficits, these expanding companies become a means of generating new sources of revenues. Compensation to employees is generally taxable in the state where it is earned, making it necessary for companies with a multi-state workforce to consider both the state income tax withholding and unemployment tax laws of multiple states.
State Income Tax Withholding
The general rule of thumb for states that have an income tax is that employers are required to report wages and withhold tax from the employee’s earnings for the state where the underlying services are performed. This general rule applies to most situations where the employee works and lives in the same state. However, in today’s mobile business environment, three additional rules may need to be considered pertaining to employees:
- Residency Rules – Attention needs to be given to how a particular state defines residency in order to properly determine withholding requirements. Most states define residency based on either an individual being domiciled in the state or a threshold of spending more than a number of days in the state.
- Reciprocity Rules – Some states have reciprocal agreements with other states to allow withholdings in the state of residence rather than where the work is performed. These agreements need to be reviewed annually as they frequently expire or change.
- Resident/Non-Resident Rules – If reciprocity does not exist between the states, then the withholding rules of both states must be considered when an employee works in a state other than one they reside in. In this scenario, the ordering is to consider the work state first and then the resident state. If the resident state’s withholding requirement is higher than the work state, then the excess would be withheld and remitted to the resident state. This reporting scenario will necessitate multiple states withholding being reflected on the employee’s W-2. Whether or not the employer has nexus in a state must also be taken into consideration for withholding purposes. Outside of honoring a reciprocity agreement, an employer that does not have nexus in the employee’s resident state is not required to withhold income tax for the state where the employee resides.
Unemployment tax
Although there may be multiple state income tax withholding requirements for the same employee, unemployment tax is only paid to one state per employee. To determine the state that the wages are reported to for unemployment tax purposes, all states follow the same four-pronged test outlined below:
- Localized Services – Where is most of the employees’ work completed?
- Base of operations – Where is the employee headquartered?
- Where is the place of direction and control of the employee?
- If a state has not been identified by the above three prongs of the test, then the employee’s state of residency is to be used as the reporting state for unemployment tax purposes.
Current Legislation
On March 7, 2017, a mobile workforce bill was reintroduced to the U.S. House of Representatives and the U.S. Senate. H.R. 1393, the Mobile Workforce State Income Tax Simplification Act of 2017, creates a uniform standard that only non-residents who work more than 30 days in a single state are subject to that state’s income tax withholding requirements. The bill was passed in the House of Representatives on June 20, 2017, and now goes to the Senate for consideration. Previous mobile workforce bills have repeatedly died in Congress and how far this legislation advances remains to be seen.
Do you have a real estate project that is not able to raise sufficient funding?
Do you have a project at risk of having to relocate to another state?
Rebuild Rhode Island may be the answer!
The Rhode Island Commerce Corporation, through the Rebuild Rhode Island Tax Credit Act, can provide incentives such as tax credits, loans or equity investments to eligible Projects!
Your financing gap could be filled with redeemable tax credits from Rebuild Rhode Island. The credits can cover 20% and in some instances 30% of project costs! Qualifying property includes:
- Commercial office
- Residential
- Industrial
- Residential
- Mixed Use
- Ground Up Construction
- Historic rehab
In order to be eligible to be considered for the tax credit for Commercial Property:
- Total project costs must be $5,000,000 or more
- Project contains at least 25,000 square feet
- Project, after placed in service, occupies one or more businesses employing at least 25 full-time employees
- And others…
Eligibility for a Residential Project:
- Property must be located in a Hope Community
- Typically $5,000,000 or more
- Project must be at least 20,000 square feet and contain at least 20 units
- And others…
Eligibility for a Mixed Use Project:
- Total project typically $5,000,000 or more
- Contain at least 25,000 square feet
For each type of project, the applicant’s equity and investment in the Project is required to be at least 20% of the total Project Cost.
If you believe you have a qualifying Project, the tax credit cannot exceed 20% of the Project cost, up to a maximum of $15,000,000. There is an additional 10% credit if the Project meets any of the following criteria:
- Project is Adaptive Reuse or Historical Structure
- For a Targeted Industry
- Biomedical Innovation
- IT/software
- Data analytics
- Design, food and custom manufacturing
- Transportation, distribution, and logistics
- Arts
- Education
- Hospitality and tourism
- More!
- Project includes Residential where minimum of 20% of the residential units are Affordable Housing or Workforce Housing
- And More!
For More Information
If you believe that you have a Project that could potentially qualify for the Rebuild Rhode Island Tax Credit, please contact Heather Prew, CPA at hprew@disantopriest.com or (401) 921-2000.
The section 179D tax deduction was passed by Congress in 2005 as part of the Energy Policy Act. It allows qualifying building owners and businesses to receive a tax deduction of up to $1.80 per square foot for their energy efficient buildings or significant improvements placed in service during all open tax years. Any of these tax deductions can be carried back two tax years or forward for up to 20 years.
How do you qualify?
In order for a building to qualify, the new improvements must surpass the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) 2001 standards if placed in service before 2016 and the ASHRAE 2007 standards for buildings placed in service thereafter. The deduction of $1.80 per square foot is broken up into three pieces; the electrical, the HVAC, and the building envelope. There are multiple methods of obtaining this deduction depending on the levels of energy efficiency your project meets. For instance, if the improvements are only made to the HVAC system then the deduction will be limited to sixty cents per square foot which is approximately one-third of the total deduction available.
The deduction is available to the owners and lessees that build or significantly improve their commercial buildings. The commercial buildings that can qualify include:
- Retail Buildings
- Office Buildings
- Industrial Buildings
- Apartment Buildings
- Warehouses
Government owned buildings qualify
Since government entities do not traditionally pay tax, the owners of these buildings can allocate the potential deduction to the businesses responsible for the energy efficient improvements. The eligible designers and builders would include architects, engineers, general contractors, subcontractors, environmental consultants, and energy service providers. However, the deductions in this instance are available on a first come first serve basis. For instance, an electrical contractor would only qualify for a third of the deduction (the electrical improvements) of an energy efficient building. But if the architect that designed the entire building has already received the full $1.80 per square foot available, then the electrical contractor would not be entitled to a deduction.
Some examples of government owned buildings that would qualify are:
- Schools
- State universities
- Libraries
- Town halls
- Airports
- Post offices
- Courthouses
- Fire stations
Where to begin
In order to qualify for 179D, an independent third party firm must review the building and improvements to approve the energy savings and the potential tax deduction. Contact our firm today for more information on this process.
Also, for those businesses that are seeking the 179D deduction for work performed on government owned buildings, these companies are required to obtain an “allocation letter” signed by the government entity. This letter will allow the government entity to transfer the deductions. Obtaining this letter secures the entities right to take the deduction and ultimately starts the process. The next step will be engaging an independent third party firm to approve the energy savings.
For More Information
For more information on this valuable energy incentive please contact John J. Rainone, CPA/MBA, CCIFP today at 401-921-2000 or jrainone@disantopriest.com.
Are you currently operating a business in Rhode Island and looking to expand? Perhaps you have a business outside of RI that you’re looking to relocate. Rhode Island, in an effort to attract and retain new and existing businesses, enacted the New Qualified Jobs Incentive Act in 2015 and has already awarded several job creators significant annual, redeemable tax credits that have allowed them to make expanding or relocating to RI more financially feasible. Here are some quick Q&A’s to learn more about the Qualified Jobs Incentive Act to see if it could potentially benefit your business!
Is the Credit Available for My Industry?
While there aren’t any limits on industries that can apply for the credit, RI Commerce provides a list of “Target Industries”, at the top of which is IT/Software, Cyber-Physical Systems, and Data Analytics. They are particularly interested in supporting the efficiency, presence, and output of these businesses in the state. The job creation requirements can vary by industry and company size, and target industries benefit from reduced requirements.
How Much of a Tax Credit Could We Expect to Receive?
The amount of tax credit received by an applicant will always be on a per new full-time job basis. Until the credit has been awarded to a cumulative 500 jobs, the tax credit could be up to $7,500 (the maximum credit) per new full-time job. Once this cumulative job threshold has been exceeded, the tax credit granted will be limited by factors including the number of new jobs created, wages paid, industry, and location.
What is Involved in the Initial Application and Reapplication Processes?
For businesses interested in this credit, a good first step would be to visit the RI Commerce’s website page for the Qualified Jobs Incentive Tax Credit (see link below). This is where you can find the actual initial application required. Generally, it requires basic business and job creation information, a project summary, details on operations, and other criteria related to eligibility. After a company has been approved for the first year, there are annual requirements to maintain this credit. This includes a “Statutory Report”, “Annual Report”, and “Base Number Employment Report”. These communicate to the state whether or not the requirements of new jobs have been met, and determine how much of a credit your company is eligible for in the following year. These reports do require verification from a CPA licensed in Rhode Island.
How Will this Credit Affect my Tax Return?
The credit received by applicants is a state credit that will reduce your tax liability dollar for dollar on your Rhode Island state tax return for both businesses and individuals through pass-through entities. Credits that exceed an applicant’s tax liability may be carried forward for up to four years. As an added bonus to this incentive, the State of Rhode Island included in the regulations that these credits may be redeemed directly with the State in whole or in part for 90% of the value of the tax credit. This means you don’t even need a tax liability to obtain value from this incentive.
What is a “Hope Community”?
In Rhode Island, certain municipalities are deemed a Hope community when the percentage of families below the poverty level is greater than that of the state as a whole. Currently, the Hope communities in Rhode Island include Central Falls, Pawtucket, Providence, West Warwick, and Woonsocket. Jobs created in a Hope community increase the amount of tax credit per job by $1,000 (not to exceed the maximum credit of $7,500). The base credit for employers begins at $2,500 and this is one of a few factors that can help employers qualify for an increased credit.
For More Information
If you’re looking for some more detailed information, RI Commerce provides links to The Qualified Jobs Incentive Act, its regulations, and application review and evaluation principles for your reference.
http://commerceri.com/finance-business/taxes-incentives/qualified-jobs-incentive/